@pashton wrote:
My inherited rental income house burnt down in 2020. I had insurance on it and they paid me out for total loss minus 1K deductible. The house was signed over to me in 2012 by my father but he did not pass away until 2016. I received structural payouts for the house and the garage. I received landscape payouts, clean up payout and loss of rents. I know I need to declare loss of rents payout as rental income. My question is: Do I have to pay taxes on the structural payouts? I believe the answer to this is yes. If so, then what is my cost basis, value when signed over to me in 2012 or when Dad dies in 2016? If my capital gains, payout minus cost basis (?) are invested in to a rental property (1031 exchange?) within 2 years do I have to pay taxes on them? If not invested, do I?
Yes, if the Insurance proceeds are more than your Basis, the amount over your Basis is taxable.
If you replace that property as an Involuntary Conversion (see 1033 Exchange, page 7 of Publication 544), yes, that gain can be transferred into the new property.
https://www.irs.gov/pub/irs-pdf/p544.pdf#page=7
As for your Basis, I'm a bit puzzled at why you are asking that NOW. What you have you been using for depreciation? You needed to have figured out your Basis years ago for the depreciation. If you have not been claiming depreciation, you need to go to a tax professional to fix things.
As for your Basis, you said your dad "signed over" the house in 2012. Did he merely put you on the title but HE still maintained control over the home, pay for expenses, and if it was rented the collected the rents on the home? Or was it actually 'yours' in 2012 and under YOUR control, you paid for expenses, and you collected any rents if it was rented then?
